The Advocate - Hepburn

Understanding strata management as a first home buyer

Understanding strata management as a first home buyer

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With more townhouses and unit complexes being constructed across city centres around Australia, more and more first home buyers are opting to invest in these modern alternatives to costlier standalone residential properties.

Buying into estates and complexes can come with some pros and cons for many first home buyers in particular, as well as some unique considerations like strata management.

In truth, strata management in Melbourne is becoming a staple of home ownership for not just inner city dwellers but also residents living in Melbourne's outer suburbs, as the city prepares for its forecasted expansion.

With this in mind, it's essential for new generations of home buyers to start engaging with all the ins and outs of strata management and what they can expect when buying a strata title.

Here are just a few of the most common questions that Aussie first home buyers may have about strata management as well as some answers to these questions.

What is strata management?

Also often referred to as 'body corporate management', strata management is a specialist form of property management that entails overseeing maintenance of property like estates that are jointly owned.

These jointly owned estates or complexes are also often referred to as 'strata schemes'. Strata managers are generally tasked with managing and maintaining common law property between strata title owners that share a strata scheme.

A strata title is the term given to a singular lot of property within a wider strata scheme. When looking to purchase a strata title, first home buyers will be able to ascertain the boundaries of their strata title (i.e. what is private property and what is common property) within their Section 32 contracts.

Generally, foyers, garden spaces, driveways, and shared fences are all considered common property that is to be maintained by your strata management team.

Any first home buyers who are considering buying into an owners corporation are advised to read through strata by-laws to ensure they're fully aware of their rights as a strata title owner prior to finalising their purchase.

Understanding what is expected of you as a strata title owner both with regards to compliance with strata by-laws and your body corp fees, is essential to ensuring that you can feel comfortable and perfectly at-home in your townhouse, unit, or apartment.

What are strata by-laws?

Strata by-laws are essentially a list of rules that outline procedures or protocol that title owners must follow in a variety of situations. These situations can range from conflicts with other title owners, to instances where title owners may seek to make permanent structural alterations to their strata title.

Permanent alterations can be anything from setting up a gazebo or other permanent outdoor shelter or shed fixtures, to renovating your strata title. All exterior and interior renovations must be approved by your strata management team, as adding walls or swapping out larger fixtures like bathtubs may increase the weight load on the slab that your property has been built on.

Your strata by-laws, also commonly referred to as your 'body corporation owner's rules' are also presented in the Section 32 contract when a strata title is placed on the market.

Although it's uncommon for strata by-laws to be drastically different between strata schemes, first home buyers are encouraged to read through their strata by-laws in full to ensure that the property they're interested in and the wider estate that it occupies, are both perfectly suited to their lifestyle needs.

What do strata management fees cover?

There are a few different types of strata management fees, these being your quarterly or annual management fees, as well as sinking funds and special levies. Whilst your annual strata management fees are established to cover the costs of building insurance for your strata title, as well as all communication, administration, and routine maintenance, the latter two are somewhat different.

A sinking fund levy or 'capital works levy' is an additional payment outside of your annual strata management fees that's designed to help your owners' corporation build up financial reserves in order to cover future capital expenditure. In other words, sinking fund levies are in place to help lower the financial blow of emergency maintenance or repairs that your strata scheme may require, saving strata title owners from having to make financial contributions to pressing repairs with minimal notice.

A sinking fund generally covers expenses like repainting and repairing facades and fences, technical maintenance like elevator repairs, driveway refurbishment, and any other emergency expenses that pertain to maintaining and repairing common law property.

Special levies are essentially the same as sinking fund levies, except that they only arise when your scheme's sinking fund lacks the capital required to perform necessary repairs or maintenance work.

Can you pick your strata management?

It is possible to change your strata management team, although doing so requires a majority vote in support of this decision at your next annual general meeting, or AGM. The AGM presents strata title owners with the opportunity to communicate with one another and discuss lot assets and liabilities, performed and planned maintenance works, and look over reports created by the owners corp committee and your strata manager.

If you or another title owner seeks to change your strata management team, you are advised to add the matter to the agenda for your next AGM. If your AGM has already been conducted, you can apply for an emergency meeting with your committee in order to discuss the matter of revisiting your strata management team.

It's important to note that a case must be built explaining why a change in strata management is likely to be beneficial for lot owners. Evidence can include aspects like misappropriation of sinking funds, poor communication between strata managers and title owners, and all other elements of your current strata management team's performance that may be likely to be shared grievances.

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Of course, once first home buyers finally find their ideal property and engage with their own strata by-laws and management fees, your understanding of all things strata will naturally be likely to deepen.

Even so, it definitely pays to stay in the loop with regards to updates in regulations for strata management as outlined by your state and federal governments.

Doing so may help you and your fellow strata title owners maintain an assurance that your strata fees and levies are always being well-utilised, and that your expectations for your strata management team stay reasonable.